Expanding a business across countries is an important milestone for any organization. India, being one of the world’s fastest-growing economies, offers huge opportunities for foreign companies to establish their presence. One of the most common ways for foreign companies to operate in India is through a Branch Office.
This article explains the eligibility criteria, required documents, and the complete registration process for setting up a Branch Office in India in simple, easy-to-understand language.
What Is a Branch Office in India?
A Branch Office is an extension of a foreign company that allows it to conduct business activities in India. It does not have a separate legal identity from its parent company. The branch office can carry out the same business activities as its head office but within the limits approved by the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA).
A Branch Office helps a foreign company build a local presence, explore the Indian market, and manage operations such as imports, exports, or consultancy services.
Key Features of a Branch Office
- The Branch Office acts as a representative of the parent company.
- It cannot engage in manufacturing or retail trading activities directly.
- All profits earned by the Branch Office are freely remitted to the parent company after payment of applicable taxes.
- It must follow all Indian laws, including those related to taxation, employment, and foreign exchange.
- Approval from the Reserve Bank of India (RBI) is required before starting operations.
Eligibility Criteria for Setting Up a Branch Office in India
To open a Branch Office in India, a foreign company must meet specific conditions set by the Reserve Bank of India (RBI). Below are the main eligibility requirements:
- Profit Track Record:
The parent company must have a track record of profit-making during the immediately preceding five financial years in its home country. - Net Worth Requirement:
The foreign company must have a minimum net worth of USD 100,000 or its equivalent, verified by the latest audited balance sheet. - Engaged in Similar Business:
The activities of the Branch Office in India should be the same as those of its parent company abroad. - Government or RBI Approval:
Depending on the nature of business and sector, the foreign company may need prior approval from the RBI or the Government of India through the Foreign Investment Facilitation Portal (FIFP). - No Manufacturing Activity:
A Branch Office is not allowed to carry out manufacturing or production activities directly. However, it can subcontract such work to Indian manufacturers.
Permitted Activities for a Branch Office in India
A Branch Office can carry out only the activities approved by the RBI. Commonly allowed activities include:
- Import and export of goods
- Providing professional or consultancy services
- Acting as a buying or selling agent for the parent company
- Conducting research work related to the parent company’s business
- Representing the parent company in India for various business purposes
- Promoting technical or financial collaborations between Indian and foreign companies
- Providing technical support for products supplied by the parent company
- Acting as an Information Technology (IT) service or software development centre
Documents Required for Branch Office Registration in India
Proper documentation is crucial for getting approval from the RBI and MCA. Below is the list of essential documents required for registration:
From the Foreign Company:
- Certificate of Incorporation or Registration of the foreign company
- Memorandum of Association (MOA) and Articles of Association (AOA)
- Audited financial statements for the past five years
- Details of the company’s directors and key management personnel
- Board resolution approving the establishment of a Branch Office in India
- Power of Attorney or authorization letter in favor of the authorized representative in India
From the Indian Representative:
- Copy of passport, address proof, and contact details of the authorised person
- Proof of registered office address in India (rent agreement, electricity bill, NOC from owner)
- Bank account details and PAN card (once obtained)
All foreign documents must be notarised and either apostilled or attested by the Indian Embassy in the country of origin.
Step-by-Step Procedure for Branch Office Registration in India
Step 1: Determine Eligibility
Before applying, ensure the foreign company meets the profit track record and net worth requirements. The business activity should also be allowed under RBI guidelines.
Step 2: File an Application with the RBI
The application for setting up a Branch Office must be filed through an Authorised Dealer (Category-I) Bank in India. The bank forwards the application to the Foreign Exchange Department of the RBI for approval.
Step 3: RBI Approval
The RBI reviews the application and supporting documents. Once satisfied, it issues an approval letter specifying the permitted activities and conditions.
Step 4: Register with the Registrar of Companies (ROC)
After receiving RBI approval, the Branch Office must be registered with the Ministry of Corporate Affairs (MCA) under Section 380 of the Companies Act, 2013 by filing Form FC-1 along with the required documents.
Step 5: Obtain PAN and TAN
The Branch Office must apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
Step 6: Open a Bank Account
A current account can be opened in the name of the Branch Office to handle business transactions in India.
Step 7: Register for Other Statutory Requirements
Depending on the nature of operations, the Branch Office may need to register for Goods and Services Tax Registration (GST), Professional Tax, and Import Export Code (IEC).
Post-Registration Compliance Requirements
After setting up a Branch Office, compliance with Indian regulations is mandatory. Key ongoing requirements include:
- Filing annual activity certificates and financial statements with the RBI and ROC
- Submitting Form 49C with the Income Tax Department
- Maintaining proper books of accounts and audit reports
- Renewing licenses or approvals if required
- Informing the RBI and ROC of any changes in the parent company’s structure or management
Non-compliance may result in penalties, cancellation of approval, or legal action.
Taxation of Branch Offices in India
A Branch Office is treated as a foreign company for tax purposes in India. The main tax implications include:
- Corporate Tax:
The income earned in India is taxed at the rate applicable to foreign companies (currently around 40% plus surcharge and cess). - Repatriation of Profits:
Profits after paying Indian taxes can be freely remitted to the parent company abroad. - GST and Other Taxes:
The Branch Office must comply with GST, Professional Tax, and other applicable state or central taxes depending on its activities.
Advantages of Setting Up a Branch Office in India
- Market Expansion:
Provides access to India’s large and diverse market. - Low Initial Investment:
Compared to a subsidiary company, a Branch Office requires less investment and documentation. - Direct Business Operations:
Allows foreign companies to engage directly in trade, consultancy, and service-related activities. - Brand Visibility:
Enhances brand reputation and customer trust in India. - Easy Remittance of Profits:
Profits can be sent back to the parent company without complex restrictions.
Limitations of a Branch Office
- Cannot perform manufacturing or retail trading directly in India.
- Requires prior approval from RBI and ongoing compliance with Indian regulations.
- Liabilities of the Branch Office are directly linked to the parent company.
Final Understanding
Setting up a Branch Office in India is an effective way for foreign companies to establish their presence and explore business opportunities in one of the world’s fastest-growing markets. However, the process requires a clear understanding of RBI regulations, eligibility criteria, documentation, and compliance.
By following the correct procedure and maintaining transparency, a Branch Office can operate successfully and contribute to long-term business growth in India.
If you need expert help with Branch Office Registration in India, professional consultants like Groom Tax can assist with end-to-end documentation, RBI approval, and compliance support to make the process smooth and stress-free.
